Welcome to another edition of TSOH Weekly Roundup.
Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.
Chart Of The Week (from “Going Through Some Pain”)
Three Notable Items
“Ralph Lauren’s Patrice Louvet On Magic, Logic, & Saying No”
An interview with Ralph Lauren’s CEO focused on the company’s turnaround efforts over the past decade. As we think about the long-term evolution of companies like Nike, I think Louvet shares valuable insights for investors.
19th minute: “We had overextended the brand. We were overextended in off-price, and we had a department store presence that was very significant. We were in a lot of places where we, frankly, were not proud of being there. My filter for the team was two things: first, are we proud of the way we show up; and second, is it financially attractive? If the answer is no to either, then we need to make an intervention to address the issue, or get out. We left about $1 billion of revenue on the table [from pulling back on distribution]. I was confident it was the right thing to do. I had done something similar when I ran the fragrance business at P&G, where I saw the benefits in terms of brand desirability… In hindsight, I wish we had done even more… It would be foolish to think we can create the desirability we’re looking to create if we look good in our Chicago store, but in other locations the brand image is different. The consumer needs to have a consistent, holistic experience for the brand.”
“Peloton Is Revamping Its Treadmills”
As expected, Peloton has revamped its treadmill line, including a cheaper, foldable model with a list price of $2,195 (relative to the other Tread models, the Flex is much more price competitive with the NordicTrack T Series). In addition, the company is progressing on talks to refinance ~$800 million of debt. Both of these developments are important components to my thesis.
“The connected fitness company unveiled three new treadmills and new features for its Peloton IQ artificial intelligence platform with tools for runners, walkers and hikers. Peloton aims to widen its customer base, from people looking for a more affordable, space-saving treadmill to more experienced athletes looking for personalized coaching.”
“Bob Chapek Is So Not Over Getting Fired From Disney”
Former Disney CEO Bob Chapek is out with a tell-all book about his career at the company, which culminated in his late 2022 firing from The House Of Mouse. This discussion with Ben Fritz of the Wall Street Journal primarily highlights the difficulties Chapek faced in navigating his relationship with Bob Iger. While there are two sides to every story, I think that there’s some merit to Chapek’s version of the facts: as opposed to doing what he could to position his successor for long-term success, Iger undermined Chapek and was happy to see him go. Iger’s history with Disney exemplifies the various challenges a great CEO must be able to navigate. On the topic of succession, Iger has proven a good example of what not to do – and I would argue that he materially hurt The Walt Disney Company as a result of his self-serving actions. (This timing is surely coincidental, but Harvard Business Review also released an interview with Iger yesterday morning that touches on this topic.)
“If the cues I got from the opening press conference [in February 2020] weren’t enough, when he did the interview with Ben Smith [in April 2020] where he essentially reasserted himself as CEO - that was as big a sign as possible of an attempt to undermine me.” (From the April 2020 NYT article: “Mr. Iger has effectively returned to running the company. After a few weeks of letting Mr. Chapek take charge, Mr. Iger smoothly reasserted control.”)
TSOH Updates
Here’s the updated TSOH research list for the past six months:
Monday’s research will be an updated look at On Holdings (ONON).
Have a great weekend!
NOTE - This is not investment advice. Do your own due diligence.
I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.