VW’s Non-Dealer Brand, Peloton Backpedals, CarGurus’ ‘Digital Deal’, McDonald’s Quits Russia

May 16, 2022
There is a lot to talk about this Monday as we survey the retail landscape across fast food, fitness, Auto OEM’s, and publicly traded auto retail including Vroom’s rightsizing and CarGurus new end to end offering for Dealers.
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McDonald’s is selling all of its stores in Russia

  • All stores have been closed since March and it has continued to pay its 60,000 employees
  • Will cost the company 1.4-1.6 Billion
  • It has been doing business there for over 30 years

VW Dealers didn’t like being surprised by the announcement of the new Scout

  • We talked about it last Friday and seemed to surprise a VW rep in the elevator
  • “On Friday, May 13, VW of America sales and marketing head Andrew Savvas sent a letter to the brand's 650 dealers, confirming that Scout will be an independent brand within VW Group and that they will have no claim on its products.”

Peloton keeps diving while in-person Planet Fitness has a big upswing

  • $2.27 loss per share vs. the $0.83 expected
  • Net losses widened to $757.1 million
  • Revenue lower than expected $964.3 million vs. $972.9 million expected.
  • Cash and equivalents for the quarter were down 22% year-over-year.
  • HOWEVER, less than 1% churn
  • Planet Fitness: 2022 Q1, almost all of its financial metrics increased YoY
  • Total revenue increased by 66.9% to $186.7 million.
  • same-store sales increased 15.9%.
  • Net income increased to $16.5 million from $5.6 million in the previous period.
  • 37 new Planet Fitness stores opened Q1.

Vroom lays off 14% of its workforce (270), reprioritizes profitability over growth and appoints a new CEO

  • Named Thomas Shortt as CEO, former WalMart exec

CarGurus launches online retail platform 'Digital Deal' to provide end to end solution for Dealers

  • $249/mo per rooftop
  • Setup similar to dealer Digital Retailing tools
  • 50-70% of deposits taken on the tool complete purchase

Paul Daly  0:22  

Yo, it is totally Monday today tottally Monday, May 16. We have so much to talk about we're talking about oh gosh peloton VW McDonald's vroom CarGurus I really mean we're gonna try to squeeze it in all of it isn't who I need this list mode and it wants no need. There's no way we're gonna fit in.

Kyle Mountsier  0:44  

Okay, here we go topics of the day by rapper rapper done. So we're gonna do today, hang with us strapping driving strap, like get the seat belt a little tight, because we're gonna be flying this morning, it's gonna do that.

Paul Daly  0:59  

But before we get into the news, we definitely want to take a moment to just acknowledge that what happened in Buffalo, right? The mass shooting in Buffalo buffalo is not that far, we have really great friends, Matt, lasher in the West Harada group who are everywhere in Buffalo. And, you know, we kind of wrestled over, like, how do we start with some heaviness? And then, you know, it was like, acknowledging the fact that the world feels a little different today. And then for some , people feels a lot different. And acknowledging that at at the outset, you know, where people first were people facing? Yeah, so

Kyle Mountsier  1:34  

yeah, I think the reality is, is that it doesn't matter whether you're an industry partner, OEM dealer, there are people in and amongst you, that have a different perspective, this morning, and walk into work, walk into grocery stores, seeing the word a little bit differently. And so just recognizing that not being afraid of those conversations, and really have that listening, I think is important as we try and build culture and all of the places that we you know, live work and play. And so be cognizant of cognizant of that, and be ready to listen and ready to be aware and, and yeah, push back on, on, you know, the things of this world that are not as they should be, they go opportunity to serve some people's with that sound. Yes, exactly.

Paul Daly  2:21  

Retail into it, let's go a lot of q1 lot of q1, earnings is going to be reported. So it's always due, we're always in for a wild week, we're gonna talk about some earnings and some publicly traded movement today. Also talk you know, we spent a little time this weekend getting ready for the Virginia Auto Dealer convention, even though it's like a month away, it's only a month away. I were excited to spend time in Asheville, North Carolina with the Virginia Auto Dealers Association, it's our first auto ABA thing that we've done like together. And so we're gonna be like, locked up with these people for like, three days,

Kyle Mountsier  2:52  

I'm really excited about it, because the difference between like the VA DA, and probably any digital dealer or anything like that, is it's 95% dealers. And so I'm really, like, we get to speak, right. And I think, you know, our desire is always to impart encouragement on the industry and, and bring a fresh perspective. But I'm ready for the perspective that we might get sitting down at breakfast or lunch or in the afternoon, you know, just hanging out as we get to see and meet new dealers and gain perspective about what's going on, where they're at, and how they're handling the challenges and, and opportunities within their organization. So that's what I'm most excited about. It's like a, it's a captive listening audience

Paul Daly  3:38  

that I get to hear. And it's a big family event, right? Every it's a thing everyone's bringing their families, we're bringing our family. So you know, we're bound to have a little bit of fireworks also, the end of this week, we'll talk about this more, maybe tomorrow or Wednesday, I'm going to be heading out to V con ve CLN. It is like the tip of the spear conference. I mean, everyone will talk about it more, because we don't have time to talk about it today. But in our efforts to bring something to the automotive industry that's never been brought before. We're paying attention to all the cutting edge things that are going on. So the next thing you come to that we put on you might be like, whatever the heck did this. And yeah, if you're paying attention, you might have a little bit of idea of where it came from. Let's talk about some news. So McDonald's is literally pulling out of Russia altogether. They're closing up shop. They've been there for 30 years. And they're like they're out.

Kyle Mountsier  4:30  

It's wild. It's it's pretty nuts to me, you know, the stat was that they've been closed since March all across Russia yet continue to pay at 600 or 60,000 1000 employees salaries. So that's that's, you know what

Paul Daly  4:46  

we worry about like five or six around asotu world

Kyle Mountsier  4:50  

I know right? Like you think about you think about that. And you think you know, big big corporation big conglomerate. And that guy kudos to McDonald's for Continuing to pay those employees while they're not open. That's a big deal. That's it. I'm impressed with McDonald's. Honestly, I would have not, that wouldn't have been the first company, I'd have been like, Yeah, they'll close down and keep paying everyone that just wouldn't have been on celebrate,

Paul Daly  5:13  

I think you should celebrate by having McDonald's for lunch.

Kyle Mountsier  5:15  

I'm not doing that.

Paul Daly  5:19  

Spirit, McDonald's, apparently, it's gonna cost the company 1.4 to $1.6 billion. But they're planning on selling all of their outlets to a local buyer. And I'm sure they're not going to stay McDonald's. You know, they've been doing business there for 30 years. There are a lot of studies that show like when McDonald's is in a country, it actually has a stabilizing effect on global global politics and economics. So it is when you look at those things, it's unbelievable, just to see how like, you know, how like commercialization of food tends to bring countries closer together. I'm burger Starbucks did it with coffee. So

Kyle Mountsier  5:54  

you know, just it's kind of like what we think retail automotive does for the US.

Paul Daly  5:59  

It's kind of what we know it does for the like, what we know retail auto does for the right, we just need everyone else to realize it too. And that's the mission that we're on. So yeah, so that's going on we thought it was an interesting just broke that news just broke this morning. So you know whatever's going on in retail, big retail specifically, um, it does affect the mindset, it does affect business. So we thought we thought we'd mentioned it this morning. We have a really funny, ironic story to talk about next. This is This is classic manufacturer. Good, just classic, right? VW Zuni

Kyle Mountsier  6:33  

got a lot of great things. We actually talked about VW, and how they are very brand first, like they understand communication on Friday. But it sounds like maybe they don't understand communication as much as they as maybe our perception was present. Communication

Paul Daly  6:49  

is different. Very different. You're

Kyle Mountsier  6:52  

right. Yeah. Apparently a lot of VW dealers are like, they heard the news about the scam. Like, wait, what is happening right now? So you're gonna do this, take this brand, how are we going to sell it? Like, is it going to be committed, it got communicated on the same day to dealers, that it got communicated to the rest of the population, and the dealer reps

Paul Daly  7:17  

to Kyle. So here's the story on Friday, right? We're all proud of ourselves. We're talking about the scale we're like, like go VW always understood brand. And now this is the pickup truck answer. A lot of dealers are pickup truck for a long time. So Kyle and I are in an elevator in Tampa, going up to a meeting room, we're going to have a little day of a show to powwow right? Our whole team is moving up there. And you know, we're in there when someone gets in the elevator with a badge on right, you're always like, let's try not to look right at their badge to see casually we're going to glance down to see if we know them or where they're from. And this young lady was from Volkswagen of America like a Volkswagen rep. So thought thought we were being real cute and clever. We were literally Hey, that new scout looks so good. It's like super cool that VW is bringing that back. And she was like, oh, yeah, she

Kyle Mountsier  8:04  

does one of those things where it's like, I should know what you're talking about. But I have no clue what you're talking about. And so I'm just kind of kind of smile and nod.

Paul Daly  8:11  

Thankfully, the elevator door open, like within like, five seconds because it made that moment a little more awkward or a little less awkward. But in reality, she probably had no idea.

Kyle Mountsier  8:23  

Yeah, no, definitely not. Yeah. And I think this is

Paul Daly  8:27  

or she didn't she didn't want to talk about it even more awkward.

Kyle Mountsier  8:30  

Oh, you couldn't? Yeah, maybe she had conversations that morning with dealers that were mad about it. She was kind of reeling from that. Who knows. But I think I think that this is interesting. It's like, what what if we actually utilize the power of internal belief, right? It's when you transfer belief to your employees or your dealers or whoever it is, you have the ability to capture the retail mindset on the ground level instead of just doing it at the global level. From an announcement perspective

Paul Daly  8:59  

and an end run it's Super Bowl commercials, Kyle? Yeah. And on Friday, this is from my things an automotive news article. Quoting from the article on Friday, May 13, VW of America sales and marketing head, Andrew SAVVIS sent a letter to the brand's 650 dealers confirming which means that like they asked, confirm, confirming that Scout will be an independent brand within VW group and they will have no dealers will have no claim on its products. That's messed up. Well, look, it's not. It's not that a company can't develop new products that are not within the dealer network. I understand that right. It's not like a dealer doesn't have rights to every product that company wants. However, when it's a market segment, and something that has really been fleshed out and been brought to the market through the local dealers, they've been asking for it they probably the dealer advisory they probably been advising on it. Right. And then for it to come out this way. I mean, was it

Kyle Mountsier  9:58  

is it is wrong Scary precedent, it does the rest of the manufacturers, and that's what's most concerning to me. So, dealers heads up, you know what you can control and, like, keep pushing back on your dealer representative on your OEM reps on, on the people that are making the decisions, speak to your dealer advisory boards and make sure this doesn't set a precedent for all of the other manufacturers.

Paul Daly  10:25  

Because, man, we know, like you were saying, like, can you how confusing this is gonna get? Right? Like, have this vehicle and it's a Volkswagen. Everyone knows it is it's a scout, and they have their own network of sales and service, and reps. And it's not the dealer and the look, because what

Kyle Mountsier  10:45  

do customers want? They want to be able to walk in and ask questions and dig in and relate to people and all of a sudden you're going to be Oh, no, actually over there. You'll go ask those questions. Here you can see these questions.

Paul Daly  10:57  

It's, it's a tough one setting up and especially, I mean, when I think of VW dealers, right, I already think of like a niche community of enthusiasts. Absolutely. Right. VW is not a mass market product. Well, it is but you know what I'm saying it's not like VW drivers already have this built in sense of like cool and adventure and trendy and like, I don't get it but we don't make the news folks, we just report it. But this had this had a fun tie back to what we did. And like Kyle said, like this the show isn't over like this is where dealers do need to push back and show proof that you know they are a viable and valuable part of the distribution network the one that's closest connected to the consumer more than the way like a great Super Bowl connect commercial could actually make a difference. The only reason that works like great commercials work is because you have a very great execution on the other side of it. Where else it's pop and fizzle and it's over. I wanted to speaking of so bad right there.

Kyle Mountsier  12:01  

Speaking of retail every single time

Paul Daly  12:07  

whatever whatever we can do peloton is their stock. We've talked about this last year, their stock still plumbing, the performance is plummeting, while in person options, specifically Planet Fitness is actually on the rise and on the increase. Now I think at face value when I looked at this when I saw this article, I was like, Oh, that makes sense, right? Because at home and in person are shifting. We're in the middle of the shift where everyone's getting out and I'd rather go to Planet Fitness and sit in my house and ride my peloton, but it's a little deeper than that. It's a little because their churn rate Kyle for peloton is less than 1%. It's wild. It's slightly lower than Netflix.

Kyle Mountsier  12:46  

Right? Yeah. So so they're keeping all of their customers it's it's obviously that there's it's obvious that there's not a lot of labelling. Right. And then there's also not a lot of new buyers, right? Because the I mean,

Paul Daly  13:02  

there was like 570% growth during the pandemic. Right. Yeah. And this the conditions? Obviously, were narrative

Kyle Mountsier  13:12  

that yes, absolutely. Yeah. And I think it was. What's interesting about so many of these companies that saw these massive gains during the pandemic is it was, you know, over inflated numbers for what that what their typical growth would have been. I mean, we're seeing that with Carvana. On the retail automotive side is this over inflation of excess excitement about the brand or an attention to it, because it met a unique, you know, need for a particular time period. And then it didn't these these brands didn't have like, a way to scale past a unique time, a unique time and the unique need. And so I think that that's where you're seeing some of these other brands, and we're seeing, like, retail, automotive having the staying power of Planet Fitness having the staying power, because they actually meet people in both spaces. Yeah.

Paul Daly  14:08  

It's not so peloton. They found they cultivated a great community that people love the product. They grew because of a situation beyond their control, but they just happen to have the right product market fit. That's right, exactly. Now, granted, they're not hemorrhaging, right? People are staying 99% of people are staying, right. Some people are checking out but 1% churn is like unheard of like this, right? So they're doing a great job. And it really comes with a mindset shift on like, what is the business actually going to be in the future? Right? What is the real revenue because when you have the attention of a community, right, you have opportunity, they have the attention, they're a function of people's life and it's their health too, right? It's not like jelly of the Month Club. It has to do with how people feel and their you know, physical a day entity and all that stuff. So it's really good things out. Now Planet Fitness, obviously, they're just doing a great job of welcoming people back. It's a complicated world to welcome people back and open up, but they did a great job of it, their net income increased $16 million, you know, over previous period of 37 new stores opened in q1. So they're opening retail strong. Think about it, they're opening retail.

Kyle Mountsier  15:22  

Here's the thing, like they are super accessible, right? Oh my gosh, yeah, you know, if you compare, like having a peloton to a Lifetime Fitness, which I don't know, if you have lifetime up there, but Lifetime Fitness, which is going to be anywhere between like 70 and $180 for a family, right? So you go to Planet Fitness, and you're talking about $10 a month, I mean, you get it on a special sale, which happens like nine times a month, this nine times a year that quote unquote, special sale, like $1 entry fee, $10 a month, you're never even gonna think about it, let alone like just the environment is captive to a really like broad audience. And so you know, being in person also having they have an app like if you are a subscriber, you have an app where you have fitness online, which is what peloton has only, right, right? Yeah, and so it's I don't know, I think

Paul Daly  16:13  

$10 a month is a fair price to pay just to have the Key Tag. So people think you work out. When I got the Key Tag, Oh, good. Come on, man. I've been watching you for the last six months you ain't working out.

Kyle Mountsier  16:28  

That's the key

Paul Daly  16:29  

tag 10 bucks, a fair price to pay. You know, like, so speaking of transitioning your business from what you thought you were going to do to what you're actually doing. That was an extended segue, but definitely relevant, um, this kind of tagging off our news about Carvanha. And the massive layoffs last week, and how the auto industry was handling that broom also laid off 14% of its workforce. That's a That's a lot. But you know, when you think of the numbers, it's 14% of their workforce is 270 people, right? You know, but they've reprioritize profitability over growth overgrowth. Right, so that is a massive shift. When you're thinking like, Hey, we're going to be a unicorn, we're going to grow fast. And we're going to just keep investing in the growth and losing money. They were like, Let's learn something really quick. Just start making money on car deals.

Kyle Mountsier  17:23  

You know what they can also start doing start taking care of customers. Sorry, had to say it got I'm sorry, Texas, all of that stuff, right? Profitability comes right after taking care of the people that are paying you,

Paul Daly  17:37  

right? That comes with focusing on today instead of tomorrow, honestly, right? Because when you're focusing on tomorrow, we have to grows or throw more money at or throw more money at it. Like if we move fast enough, all these problems won't be able to catch up with us. We know that's not true. We know problems do catch up, they have been catching up. And for room, it's interesting for them publicly saying that we're going to focus on profitability. You know, we always talk about stocks and publicly traded companies, specifically as a balance between Is it a voting machine right now? Like, is the stock price based on the actual fundamentals of the business like revenue and profit? Or is it a voting machine based on you know, what people feel about the company and growth, with growth, when you focus on hyper growth in the season of hyper growth, people just start pulling the voting machine sounds like broom is saying like, we think that being a weighing machine is more sustainable in the future.

Kyle Mountsier  18:27  

Yeah. And I would agree with them, especially heading into, you know, potential economic turmoil, you know, thinking high growth over the next, you know, 12 to 18 months is probably not a strategy that's going to keep you in a high growth mode right

Paul Daly  18:44  

now. So and when we talk about the takeaway, right, all these kinds of habits, current theme in the takeaway, and it is focused on what is going on right now, it doesn't mean we can't think and plan for what's going to happen in the future. But don't neglect the fact that the fundamentals of the car business are taking care of people first, right making decisions with taking care of people first and taking care of your community first, and like what is that going to do for you in the next six and 12 months? overthinking? Like oh how

Kyle Mountsier  19:14  

you think people people hear us a lot and we talk a lot about looking forward and thinking about you know what's coming next. But the reality is, is that one foot now one foot future is extremely important and especially right now, thinking about your current business, what you can control setting yourself up, you know, to succeed long into the future. It is about focusing on now it is focusing on on your current customer base, the way that they're engaging with you the way that they're communicating about you because that's your future success. Everything set up future success right now is about how what consumer sentiment is of your brand.

Paul Daly  19:51  

Absolutely. Gary Vaynerchuk calls it clouds and dirt right you have to be have your head in the clouds and looking over what's but you also have the hands in the dirt on a regular basis. Last story for the day. I think we got through record five stories today.

Kyle Mountsier  20:03  

Let's go. Let's go. We just wanted to talk briefly about the fact that cars CarGurus has entered the market with their online retail platform. They're calling it super uniquely digital. Right?

Paul Daly  20:17  

Why do you laugh? It's very direct name.

Kyle Mountsier  20:19  

It is it's a very direct name. Just, you know, nothing unique. They're no, they're going to be charging

Paul Daly  20:25  

consumers like I would love a digital deal. Yeah,

Kyle Mountsier  20:28  

I want my digital.

Paul Daly  20:30  

I don't throw shade on the name though. It just I mean, it is what it is. It's reaction but But

Kyle Mountsier  20:35  

249 bucks per roof tops. So here's, here's like, coming from the marketing side, it's like, Oh, yep, there's another bolt on to be able to do, you know, business digitally with customers. You know, you're talking about basically adding another digital retailing to the top of the stack. So just an encouragement to dealers. Just be careful. Like if you are entering that, if you will do want to enter, enter that recognize that your that your company, that the people that you are having, engage with that platform, have to learn a new platform, engage in a new medium, probably have another login. So just being aware that the retail mindset here is very important and recognizing what your retail brand looks like, across multiple different platforms. Just be cognizant of that, I think is the encouragement there.

Paul Daly  21:24  

Yeah, absolutely. Yeah, I don't want to throw shade on the name. I did throw shade on the name, you threw shade on the name, it just seemed a little literal. Literal is okay. And I'm sure there's a whole focus group that decided on that name. And you know, it probably proved that it's just very clear and effective. I don't know. I don't know what else to talk about. We've talked about too much. We've done all the things so Monday, it's only 919 on the East Coast. We've already talked about all this stuff. Either way. We have a whole lot of work in front of us this week. You have a whole lot of work in front of you this week. We have a whole lot of work in front of us this week. So let's stick together get the work done. So serve some people on a Monday.

Transcribed by https://otter.ai