Chanel vs. Hermès, Disney, Instagram, Chevy Silverado: Friday's top stories

The Yahoo Finance Live team discusses the top trending stories of the day, including Chanel raising the price of its handbags to compete with Hermès, Disney's stock drop, Instagram releasing a Twitter rival app, and the new Chevy Silverado.

Video Transcript

SEANA SMITH: Take a look at some of the top trending stories of the day. We spent a lot of time this week talking about retail. Let's take a look at the luxury consumer. High end retail has certainly been a standout now for some time.

Higher income earners keep spending. Well, there's a headline out of the Journal today that Chanel is challenging Hermes in the bag war. Now, for the first time ever, Chanel's most popular handbag-- this is the classic flap handbag-- you're looking at the Birkin right now-- is the more expensive than an Hermes Birkin.

OK, so the price of the Chanel bag up 75% in just the last three years. It costs less than $6,000, 2019. That's still very, very expensive today. It's going to set you back over 10,000 bucks. Chanel saying that the price hike is due to inflation and exchange rate shifts. Certainly outpacing inflation, Akiko, by quite a margin. And take a look at the company's results. It's privately owned, but they do release their annual results. Their profit margins went from 28% in 2019, all the way up to 35% in 2021. I would guess that they're still going to continue there to the upside, given the price of this bag.

AKIKO FUJITA: Is it really about inflation? That's my question. I think part of this is about perception, right? The Birkin was the exclusive up there. Chanel wants to get to that level. And to that point, there's a number here that kind of stood out to me in the Journal article. The Birkin is only 6% more than it was prepandemic level.

So why is Chanel outpacing that? There's a number of ways to work that. You could limit the number of bags. You could raise the price a little more. I mean, to me, luxury is all about perception. And Chanel is trying to reach that Birkin level.

ALLIE CANAL: I just don't know if they can. I mean, the Birkin bag, that's like woven into pop culture references all over. I mean, I think this is also a story about the strength and resiliency of the luxury consumer. They are willing to pay these higher prices, despite inflation, despite these price hikes, whatever you want to call it.

Now, this stat from the article stood out to me. The Chanel model was $4,000 cheaper prepandemic to the Birkin in the US. Now, today, it's only $200 less. And the pandemic was not that long ago. So the fact that they're increasing these prices that dramatically is just crazy to me. I don't know if I could ever justify spending over 10 grand for a handbag.

SEANA SMITH: I was going to say, I wish that this is a dilemma that I actually had, which of these bags to go for. Maybe one day, though. Pras, you're a luxury guy.

PRAS SUBRAMANIAN: Yesterday, you guys complained about the watches that I was talking about being too expensive. You guys are like, $10,000 handbags, my God. Well, I mean, I know the Birkin. Even I know the Birkin-- very, very popular. I did not know about the--

SEANA SMITH: You're fancy guy-- makes sense.

PRAS SUBRAMANIAN: Yeah, right. I didn't know about this flat bag, but I'm not surprised about the--

SEANA SMITH: Flat bag.

PRAS SUBRAMANIAN: --relentless bid up in pricing because I'm seeing that in the car world. The Rolls-Royce CEO told me, the Bentley CEO told me, they are charging more and more for their cars. People are paying for that, including customization, stuff that makes their products more unique. People want to pay more and more for that because they want to have that thing that stands out. And maybe-- I don't know about this, but maybe there's some purses out there that will make you stand out in the crowd.

SEANA SMITH: I think they're just trying to be a little bit more exclusive, Chanel. And they want to rival Hermes Birkin bag. I don't know if they'll get there, though.

ALLIE CANAL: I don't know. But in the meantime, the richer just keep getting richer, I guess. Moving on to my story, it's Disney, the stock falling today about 2% on the heels of a fresh Wall Street downgrade. Macquarie analyst Tim Nolan downgraded shares to neutral from outperform, citing linear network declines, direct-to-consumer hurdles, and the slowing parks business. He sees those near-term uncertainties weighing on earnings, valuation, and sentiment, adding he's concerned about Disney's ability to reach streaming profitability by 2024, which is the company's current target.

And part of that reason for that view is the likely purchase of Hulu from Comcast, which currently controls 1/3 of the streamer, along with those sequential subscriber declines. And then ESPN, guys, that's just an issue lurking in the background. The Wall Street Journal reporting Disney is currently laying the groundwork for that over-the-top service, which Iger has said will happen, but analysts now are saying the process to get there is going to be incredibly bumpy.

PRAS SUBRAMANIAN: I want to just touch on quickly. We talked about ESPN yesterday. But the theme parks is very interesting to me in the sense that I read a tweet just now by Conor Sen at Bloomberg talking about how Disney built Epcot, Hollywood Studios, Typhoon Lagoon, Animal Kingdom, and California Adventure between 1982 and 2001, and they haven't built anything since, the only big thing being the Star Wars theme park. So there's like a--

SEANA SMITH: Which they're closing.

PRAS SUBRAMANIAN: Right, they're close-- so there's a capacity issue there. More people want to spend money on these types of vacations and experiential things. And there hasn't been that much built out. Las Vegas has only had one major casino built since 2010. There's actually a capacity issue when it comes to those types of vacations. And maybe Disney is there to deliver that and also maybe charge higher prices.

AKIKO FUJITA: Yeah, you know, Allie, when you mentioned the streaming profitability, the timeline there, that's an interesting one for me to watch because so much of this is about an arms race. If you say-- if Netflix says we're going to spend more, then, of course, Disney is going to match that. That's been where it's been going. Now we're starting to see a bit of a pullback in spending in content. And yet, here we are, talking about the crowded streaming landscape. At the end of the day, you do have to compete on content, and you do have to put money up if you are trying to win out in that.

So there's a bit of a balancing act, it feels like, that's happening right now that's not specific to Disney. But I'm curious, now that we are in this environment of a bit of a pullback, a bit of a slowdown, how the other streaming sites also respond because at the end of the day, when you look down the line, you still want to be in a position of strength. In order to be in that position, you've got to churn out content.

SEANA SMITH: You've got to churn out content. You've got to have the subscribers that are willing to pay for whatever you charge for your service. It will be interesting when we talk about the slowing economy right now, whether or not people are going to cut down on the number of subscriptions that they have and who, of course, will then take the brunt of that. When it comes to the parks business, and Pras, you brought that up here, it's amazing to me in this type of economy that people are spending, and they're spending as much as it costs to go and spend a weekend--

ALLIE CANAL: They're buying Birkin bags and then going to Disney.

SEANA SMITH: And Birkin bags and they're going to Disney. I mean, that's what it sounds like. It will set you back hundreds and hundreds of dollars per person.

AKIKO FUJITA: That is ultra ultimate luxury. If you're taking a Birkin bag to go to Disneyland, you're doing just fine. And that is a divide we're talking about. But I don't know. Maybe there are people that are doing that.

SEANA SMITH: Oh, there's Star Wars hotel. What, was it 4,800 bucks for a weekend for a couple? That's pretty high end luxury to me.


AKIKO FUJITA: That's a lot of money. That's a lot of money. We'll end it there. Let's talk about this other thing that I'm watching right now-- Instagram set to launch a text-based app that will compete directly with Twitter. And the app could be released as early as this summer.

Now, according to details that were first released on the Substack newsletter ICYMI, In Case You Missed It, the platform will allow users to post text updates of up to 500 characters. Users will be able to attach videos of up to five minutes long, and the app is going to be decentralized here. This is going to be compatible with other apps like Mastodon. Bloomberg reports Meta's already testing the product with influencers and some creators.

And we go back to where things were at the very beginning when Elon Musk bought Twitter. How many of those users moved away? I'm curious how many of those users, now Meta, Instagram, can bring on board because there are a lot of creators out there that are looking for a newer platform, where they feel like it's a little safer, they feel like there's more of a discourse. I don't know. Something you guys would try out?

SEANA SMITH: Well, I think the fact the safety features that they laid out, just in terms of you can regulate who is able to reply to you, you're able to control some of your followers, features that are not available right now on Twitter, that's what I think could potentially set this service apart from what we have today on Twitter.

But when we take a look at Twitter's user base, they've been struggling now for some time to continue to grow that user base. This could make sense, but you've got to question what the future looks like for a service like this, for a platform, and how many people are actually going to leave Twitter and go there. I don't know. It makes sense from a creator's perspective, though, I think.

AKIKO FUJITA: Yeah, and they haven't figured out how to monetize it yet. That's the big question on this new platform.

ALLIE CANAL: Exactly, and to me, the Twitter brand is just so strong. And we've seen other competitors try and come to market. They haven't been able to gain the same traction. You could also argue, though, that now is a good time to debut something, considering a lot of users are frustrated with all these changes under the leadership of Elon Musk. That's about to change soon.

But one thing that stuck out to me was the character limit. I think 500 characters might be the sweet spot. Twitter's original character limit was 140. They doubled that in 2017 to 280. So that's something new, but yeah, to your point, I just don't know how they're going to be able to lure these users onto the platform. I guess it starts with the influencers. If you can get Gen Z, you can have access to a lot more people, but we'll see. I'm not fully convinced at this point. And do we need another social media service? Personally, I don't think so.

PRAS SUBRAMANIAN: Well, I mean, what's the motto? Imitation is the most sincere form of flattery. And that's Zuckerberg's motto, right? I mean, he copies everything. He makes it maybe better. I don't know. When I saw the actual screenshots for the Instagram version of Twitter, it looked just like Twitter. I mean, it was almost exactly the same.

And I have to ask myself, I like Instagram because I like the picture oriented, image oriented nature of it. I don't want to be writing big 500-word essays and stuff like that. I think I want to use it mostly for image. But I could be wrong. Maybe like these more influencer people will come on there and maybe want to do more interaction that way. Maybe Elon will turn off more people who will want to use Instagram for that tweeting nature.

Anyway, for my take here, my roundtable pick, big news out of GM, the automaker announcing its Silverado EV work truck that's meant for Fleet customers will now top out at 450 miles of range. That's an improvement over the 400 mile prior estimate. Great for Fleet operators who want to value range over niceties like touch screens and air suspension. But the range topper will set those back around $80,000. So it's not cheap there.

But GM does say the cheapest Silverado EV work truck will come in around 41,000, so. But we won't know what the range is. So there is a cheap option there, probably about half to a bit more than half of range there. But it is interesting to see That This truck will have 100 miles more range than its nearest competitor, which is the F-150 Lightning or the Rivian with the large battery pack. So kind of a big deal here in that EV pickup space.

AKIKO FUJITA: Yeah, I mean, range anxiety is a real thing, right? I mean, and especially, Pras, I'd be curious to get your thoughts here because anything over 300, I feel like is kind of the comfort zone for those who haven't necessarily gone all in on EVs. When you talk about trucks, you've got to go even more than that because you figure those who are currently driving ICE trucks are harder to convert over to the EV side.

PRAS SUBRAMANIAN: Yeah, I mean, if you can-- 300 miles is usually considered like the psychological barrier of what people are willing to live with. 400 miles, 450 miles, I mean, people don't want to drive that much in a single day, let alone a single trip, right? So what we're seeing is that could be the range that could help people out.

But also, in the future, you could see trucks at lower range, but the ability to fill up much faster, like, in gas station time. So that could be the future, too. So we're going to see how that works out right now, but GM is sort of throwing down the gauntlet here with that 450 plus mile range.

SEANA SMITH: Yeah, certainly. I think a lot of the talk here ahead of this news was that Chevy was late to this when it comes to the Silverado, given the fact that the F-150 Lightning has been out now for quite some time. But it might have been worth the wait, given the fact that a lot of people, like you guys are saying, range anxiety is such a huge thing. And the fact that you could get 450 miles here before you have to recharge is certainly a differentiating factor.

I am curious, though, what the growth trajectory looks like when it comes to EV pickup trucks because I'm with you, Akiko. I would think the pickup driver would be one of the last to convert to EVs, but maybe I'm wrong.

ALLIE CANAL: I agree with that. I mean, to me, it's-- I'm not a car person, but I understand the importance of mileage and of these fleets, especially when you're talking about commercial industries. So I guess we'll have to see. But it's certainly a hotly competitive market. So this doesn't surprise me.

SEANA SMITH: Yeah, exactly. And Ford's having a tough time keeping up with their reservations, so maybe they'll prove us all wrong.